Steven E. Springer
TAXATION INFORMATION FOR BUSINESS DISSOLUTION
During both the formation and the dissolution of a business, there are many legal points to consider. Just as you begin a business applying for a business tax identification number, when you choose to terminate a business, careful consideration must be given to taxes. Failure to comply may result in additional stress and financial repercussions.
Dissolve, Surrender, Cancel
Dissolve, surrender, and cancel all seem to be synonyms of terminate. In California business law, they signify differing processes dependent on the type of business owned. This knowledge is essential for determining the correct paperwork to complete to end your business entity legally. Consider the following:
- Dissolve: Businesses incorporated in California initially are known as domestic corporations and dissolve their business;
- Surrender: Businesses incorporated in another state besides California are foreign corporations, and they surrender their business; and
- Cancel: Partnerships and limited liability corporations (LLC), regardless of origination, cancel business operations.
Termination with FTB
The Franchise Tax Board (FTB) in California controls many financial operations within the state. Two major programs operated by the FTB are the Personal Income Tax and Corporation Tax. There are necessary steps involved to end your business entity. These are:
- File any past due tax returns and pay any remaining balances, such as penalties, fees, and interest;
- Complete and file the current year tax return, ensuring that the “final return” box is selected and “FINAL” is written on top of the first page; and
- Cease doing business after final tax return is complete.
For dissolution to be complete, there is a need to send the appropriate forms to the Secretary of State (SOS). These documents include:
- Domestic LLC: Certificate of Dissolution (LLC-3), Certificate of Cancellation (LLC-4/7) or Short Form Certificate of Cancellation (LLC- 4/8);
- Foreign LLC: Limited Liability Company Certificate of Cancellation (LLC – 4/7); or
- Partnerships: Limited Liability Partnership Notice of Change of Status (LLP-4).
If you are a business operating in the state of California and have decided the time has come to close the doors on business operations, the experience can be mentally exhausting. The unknown can be unnerving, including the unknown of the future, as well as the necessary legal process of dissolving. Having the assistance of a long-standing experienced legal professional alleviates a significant amount of stress and ensures that all the necessary steps are complete, avoiding any future tax litigation issues. If you are interested in discussing this process with a San Jose, CA business attorney, contact The Law Offices of Steven E. Springer today at 408-779-4700 or 510-791-7137 for your free 20-minute initial consultation. With offices in San Jose, Morgan Hill, and Fremont, we are conveniently located to serve you.